Every year the tax declaration becomes a pain in the neck of those who don't plan their taxes throughout the year. As result, to meet the stipulated deduction limit such people invest in any of the prescribed investment instrument in a haste. This approach will do you more harm than good. To be on the top of your game, you have to plan your tax just like your investment. It has to be timely and systematic. The point that many people miss in their tax planning is that the Income Tax Act gives them various windows of opportunity to not just save tax but get handsome returns. To make most of it, let's shed some light on all the ITA tax saving provisions and how to get the best out of them.

Section 80C is one of the best and the most used tax saving windows. Here you get various investment options to choose from. However, not all them give good returns. Hence, while selecting investment mediums one has to exercise utmost caution and diligence. Let's do a critical analysis of all the available options and which one you should go for.

ELSS - The Best Tax Saver

Equity Linked Saving Schemes (ELSS) is a mutual fund with lock-in period. In ELSS, just like in a mutual fund, your fund managing company pools your's and other investor's money and invests it across sectors in the stock market. A bigger pool of money attracts big returns, on the other hand, the losses get spread out. The salient feature of ELSS is that it has the lock-in period of 3 years which is less than any other tax-saving medium. For the tax saving reasons, ELSS becomes very attractive. By investing in it you become eligible for tax relief under Section 80C and you also stand to gain good returns. Other Mutual Funds do not offer tax benefits.

Investing in ELSS is as easy as investing in mutual fund. The best part of ELSS is that it gives better returns than all the tax-saving mediums that are prescribed by the Income Tax Act i.e. PPF, NPS, ULIP, etc. Under section 80C you the amount allowed for deduction is up to Rs.1,50,000. Thus it is a wise thing to invest that much amount in ELSS and if you have any surplus amount you should invest it in an open-ended mutual fund which offers more growth and high liquidity.

Public Provident Fund (PPF)

PPF is the is the most stable and dependable investment scheme as it is run by the government. However, PPF investment comes laced with some strict conditions i.e. 7 years lock-in period plus certain limitations on the amount of investment like you can only invest up to Rs.1,50,000 in a year. The reason it is one of the most popular tax-saving tools is that it gives compound returns. Under section 80C you can claim up to Rs.1,50,000 deduction by investing in PPF. It is advisable that to get the tax benefits some portion of your income should be invested to PPF. However, points to remember are - PPF provides fixed returns and the interest rates get reviewed, often slashed, from time to time. PPF should only be looked at as a tax savings scheme and not a wealth creator.

Opening a PPF account is an extremely simple process. You can open it at a Post Office or at a nationalised or private banks i.e. State Bank of India, ICICI Bank, Axis Bank, etc. As PPF is supported by the Government and gives risk­-free and fixed returns it keeps your capital safe and growing.

Tax-saving Fixed Deposits

If you are looking for a shorter lock­-in period and at the same time looking for a guaranteed return along with a tax­-saving option then fixed deposit is just the option you are looking for.

Opening an FD account is extremely simple. You can do it online as well as at a bank branch. The interest rates are different for different banks. However, a point to note here is that the rates are not going to be much different (higher) as FDs are know to give fixed but moderate returns.

The biggest feature of the tax­-saving fixed deposits is that the interest rate remains the same throughout the period of 5­ year. The rates of interest for Indian citizens, Hindu Undivided Family (HUF) and NRIs varies from bank to bank. Usually, it starts from around 8 percent in most of the banks. Senior citizens and bank staff members get higher interest rates. The interest earned on the tax-saving FDs is taxable and it is deducted from the source. Like in all other tax savers, in FDs, there is a minimum investment amount condition. You can deposit from minimum Rs.100 to the maximum is Rs 1,50,000 in a year.